More on the budgetary smoke and mirrors

It is pretty easy to put forth a budget and explain how you are going to pay for it when reality has no bearing on those numbers. In a masterful job of talking out of both sides of your mouth and getting away with it, President Obama is signing hundreds of billions in new pork barrel spending one day, calling for fiscal restraint and a reduction of the deficit on the next day and then proposing a massive budget with hundreds of billions in new spending on health insurance above and beyond what is already in place in an era of declining revenue. He claims that he can find savings in wasteful spending and by letting tax cuts expire on “the rich” and only impact the top 2% of taxpayers.

One word for you: Baloney!

In a piece titled “The 2% Illusion”, the Wall Street Journal lays to rest the notion that we can have an enormous increase in spending and only those rich fat cats are going to have to pay for it.

One of the most grotesque aspects of the modern Democrat Party is their faux populism. When you see filthy rich white liberals proclaiming the need for the rich to pay their fair share while riding in limos and flying first class, alarm bells should be going off. Although the Left doesn’t like facts, they are troublesome to set aside and these are the facts when it comes to the rich paying “their fair share”:

Consider the IRS data for 2006, the most recent year that such tax data are available and a good year for the economy and "the wealthiest 2%." Roughly 3.8 million filers had adjusted gross incomes above $200,000 in 2006. (That's about 7% of all returns; the data aren't broken down at the $250,000 point.) These people paid about $522 billion in income taxes, or roughly 62% of all federal individual income receipts. The richest 1% -- about 1.65 million filers making above $388,806 -- paid some $408 billion, or 39.9% of all income tax revenues, while earning about 22% of all reported U.S. income.

Even taking the neo-socialist agenda of Obama and company to its logical extreme and taking every taxable dime of the “rich” is not going to get it done…

But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.

Ah those facts, so troubling and inconvenient!

A 2010 Federal budget of almost four trillion dollars (that is $4,000,000,000,000) means that given the approximately 300 million people in America, the Federal government is spending (and taxing and borrowing) on your behalf around $13,000+ for every man, woman and child. With a median household income in 2007 of $50,233 nationally, and presuming an average household size of four people (two adults and two kids) that means that we have approximately 75 million households in America. Thus the Federal government in 2010 is spending the equivalent of $52,000 per household, which is more than the media household income nationally. These statistics may be a little off, I am not using a scientific metholodgy here but the point remains that the Federal government in 2010 is proposing to spend more per household than the median household makes in a year. Does anyone else see a problem with that?

The tyranny of the proletariat

Let’s hope that this is a not a sign of things to come in the Obama administration….

CHICAGO -- Sit-in protests after job layoffs at a local door-and-window factory here have escalated into an intense labor-relations fight that could have financial ramifications for Bank of America Corp.

On Monday, Illinois Gov. Rod Blagojevich, at a news conference in front of the Republic Windows & Doors factory, called on state agencies to suspend business with Bank of America, based in Charlotte, N.C.

The city of Chicago also threatened to stop doing business with the bank.

Gov. Blagojevich's comments came a day after President-elect Barack Obama offered support for the employees, saying at a news conference that they are "absolutely right."

Last week, the factory notified its nearly 300 employees, of which about 80% are unionized, that it would close by Friday because Bank of America had told the company it would be cutting off all financing.

In a statement, Bank of America said that it is "reaching out" to Republic management "to see what they can do to help resolve this issue." But the bank noted that "When a company faces such a dire situation, its lender is not empowered to direct the company's management how to manage its affairs and what obligations should be paid. Such decisions belong to the management and owners of the company."

What we have are former employees of a firm illegally occupying private property and the state of Illinois blackmailing a private company to try to force Bank of America to take responsibility for the collapse of a company. What sort of precedent does this set? If someone with the right connections in labor has their home in Michigan foreclosed by Chase, will the state of Michigan be pressured to suspend doing business with Chase unless the home foreclosure is revoked? This amounts to a heavy handed interference by the state of Illinois in a politically charged situation. How many other businesses that are credit worthy in Illinois do business with Bank of America? Banks are in the business of risk, but that risk is a measured one within carefully constructed parameters. Banks don’t withdraw credit because they are meanies, old white guys sitting around in a boardroom smoking cigars and capriciously withdrawing credit to ruin Christmas. Banks make money by making loans, but banks lose money when they make bad loans. Now the city of Chicago is getting in on the act…

Also on Monday afternoon, 15 Chicago aldermen said they were planning to introduce a city ordinance next week that would require the city of Chicago to stop doing business with Bank of America, including a requirement that the city withdraw all funds and deposits with the bank or any of its subsidiaries.

"It is outrageous for Bank of America to cut off credit, a company's lifeblood, after receiving $15 billion of taxpayers' money as part of the federal government's Troubled Asset Relief Program," said Alderman Joe Moore, of Chicago's 49th Ward.

The fact that BoA received funds from the TARP program (an ill-fated venture from the start) is irrelevant. The TARP program was not intended to force banks to extend credit to non-creditworthy borrowers. TARP does not give the government underwriting authority for private lenders. In fact, it is exactly that sort of government meddling in underwriting that has to a great extent led to the current crisis as borrowers were extended credit that they had no reasonable chance of repaying.

When commercial borrowers are in distress, they are shifted to a specialized group within a bank (often called “special assets groups”) where they are monitored far more closely than normal. I would assume that what has happened in the case of Republic Windows & Doors was that their financials showed a disturbing trend as far as cash flow, debt ratios, profitability etc. was concerned, leading BoA to deduce that they would be unable to continue to make their payments (i.e. “service their debt”). Because of that, BoA exercised their clause that allowed them to cut off credit to the company, which is perfectly legal and is a sound business practice. In fact, to continue to extend credit to a company that is unable to repay that debt is corporate malpractice. If Illinois stops doing business with BoA, that will hurt BoA and help one of their competitors like Chase and Chase has the same business practices, they are also cutting off credit to companies and moving business out the door. It is a reality of the world we live in, credit worthy consumers and businesses will continue to have credit extended to them and non-credit worthy borrowers will not. That is the way it should be. No one is going to, and no one should, give me $500,000 in credit because I can’t pay it back.

The fact that someone has a job at an employer doesn’t obligate, in a free society, that employer’s bank to continue to make credit available to a company that clearly cannot pay that credit back. Despite the ignorant claims of solidarity, the truth of the matter is that for whatever reason this company was in financial trouble (perhaps due to inflated union wages? Hmmm…) and as much as I sympathize with those who are losing their jobs, as I have in the past due to circumstances outside of my control, there is no justification for the extortionist tactics being employed by the state of Illinois and the city of Chicago. This is simple political grandstanding and class warfare at its most grotesque. So much for change...

The candidate of change?

Headline from the Cincinnati Enquirer:

Obama proposes tax boost

Shocking! And so it begins. The candidate of "change" has nothing new to say, nothing that liberals have not already been saying for my entire life: soak the rich, raise taxes, redistribute wealth, increase the size, scope and power of government, class warfare. As the first major party minority candidate, Obama is unique but he is hardly an agent of change.

COLUMBUS - Sen. Barack Obama promised senior citizens Friday that as president, he would protect Social Security benefits and provide universal health care.

To extend the life of Social Security, Obama proposed applying a payroll tax to annual incomes above $250,000, affecting the wealthiest 3 percent of Americans. The Democrat also proposed eliminating income tax for any retiree making less than $50,000.

"Secure retirement is no longer a guarantee for the middle class,'' Obama said during a visit to Oakleaf Village retirement center with his wife, Michelle. "It's harder to save and harder to retire."

It is not harder to save, you go to the bank and open an account. What is difficult for people is to curtail their spending. The definition of "necessity" has broadened considerably in the last few decades. Utilities used to be electric, gas, water, phone. Now utilities include things like multiple cells phones, digital cable or satellite TV, high speed internet. Our nation's family vacations have become more and more ornate and expensive (we still just got to my parents place on the lake, for free). It isn't hard to save, it is just hard to not spend on things that really aren't required. Like most cagey liberals, he paints everyone who makes more money (or at least is perceived as making more money) as rich. His universal health care program, if enacted, would be an enormous bureaucratic nightmare that would have to be funded by drastically higher taxes, and if you think insurance is expensive now wait until the federal government with no incentive for efficiency takes over. Barack Obama promises change but it certainly would be a change for the worse.